Dual entries may have multiple lines of information, the key is that total debits must equal total credits. When there are more than two lines of data, it is referred to as a complex entry.
Many bookkeepers are initially misinformed about the dual entry accounting system. They think that based on the wording that accounting entries have only two lines of information, one line for a debit and a second line for a credit. What the words ‘dual entry’ mean is that debits must equal credits. Therefore, either or both values can have multiple lines of data. If multiple lines of three or more, the entry is called a complex entry.
This lesson is designed to illustrate this concept. Keep in mind that at the end of the entry all debits must equal credits.
The first illustration is a simple purchase of materials with a discount from the supplier, i.e. cash is paid. The entry is recorded in the purchases journal as follows:
Date Ledger Description DR CR
09/05/15 COS-Materials Lumber – Smith Job $100.00
Discounts Lumber – Smith 2.00
Cash Payment Lumber – Smith 98.00
Notice both debits and credits are equal. This is an example (simple example) of a complex entry.
Now let’s take a look at an entry where both debits and credits have multiple lines of data. In this example the company purchases two pieces of equipment from the same company and paid some cash and used a long-term loan for the balance:
FIXED ASSETS JOURNAL
Date Ledger Description DR CR
09/08/15 F/A – Equip Front End Loader 43,000
F/A Trans Loader Trailer 2T-4000 6,500
Cash Partial Payment 15,000
LT Debt Bal. of Payment 5/YR Note 34,500
Again, notice both debits and credits are equal? Also, both debits and credits have multiple lines of information and that the respective ledgers are different.
Now let’s complicate this some more and illustrate a highly complex entry with multiple lines of both sides with multiple ledgers (accounts) and some of the ledgers are the same. Here is an example of a payroll entry:
Date Ledger Description DR CR
09/10/15 COS – Labor Joe Smith 10 Hrs 100.00
P/R Tax Expense SS Match JS 6.20
P/R Tax Expense Medi Match JS 1.45
P/R Tax Expense FUTA/SUTA 1.10
P/R Tax Liability Fed Withholding JS 7.00
P/R Tax Liability SS W/H JS 6.20
P/R Tax Liability Medicare W/H JS 1.45
P/R Tax Liability State Income Taxes JS 3.00
P/R Tax Liability SS Match JS 6.20
P/R Tax Liability Medicare Match JS 1.45
P/R Tax Liability FUTA/SUTA Due JS 1.10
Cash – Payroll Acct Net Check #3108 JS 82.35
As stated before, both sides (debits and credits) are equal. Notice there are three payroll tax expense lines and seven payroll tax liability lines? This is done to keep the respective lines separated as each line is a function of a different tax.
With bookkeeping the payroll entry is usually the most complicated entry. It is rare to have a more complicated entry in a small business set of books.
This lesson teaches you that the dual entry system means that debits equal credits and the journal entry may have more than two lines of information. Multiple lines of entry even multiple lines for the same ledger account refers to a complex entry. ACT ON KNOWLEDGE.
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